This invention relates generally to Merchandising Decomposition Analysis (MDA) system and method to provide fast and efficient analysis of benefits for price optimization systems. More particularly, the present invention relates to a method for analyzing benefits resulting from changes in price setting compared with pre-optimization benefits.
For businesses, prices of various products needs to be set. These prices may be set with the goal of maximizing profit or demand or for a variety of other objectives. Traditionally price setting may be performed by experienced business managers, by comparison to competitors' pricing, to maintain sales goals or through complex price optimization systems.
For pricing optimization systems there may be a myriad of factors considered for the generation of demand models. As a result, the function for forecasting demand may be very complex. Additionally, costs may be fixed or variable and may be dependent on demand. As a result, the function for forecasting costs may be very complex. For a chain of stores with tens of thousands of different products, forecasting costs and determining a function for forecasting demand are difficult.
Additionally, after pricing optimizations have been performed it is currently difficult at best for businesses to attribute benefits of the optimization. Such benefits analysis is useful for the planning of future business goals, as well as providing assurance that the price optimization is performing acceptably.
Currently benefits analysis may be performed manually by comparing previous sales data with current sales data. However, such a general approach does not accurately identify benefit sources, or account for additional variables such as seasonality and promotional effects. As such current benefits methodologies are highly subjective and rely upon inaccurate comparisons. Such benefits analyses are wholly inadequate to base business decisions upon as they do not correctly characterize the price optimization benefits.
For the typical business, the above systems are still too inaccurate, unreliable, and intractable in order to be utilized effectively for benefits analysis of price optimization. Businesses, particularly those involving large product sets, would benefit greatly from the ability to have accurate benefits analysis.
It is therefore apparent that an urgent need exists for an improved system and method for merchandising decomposition analysis for benefits analysis that is both accurate and efficient. This solution would replace current benefit analysis techniques with a more accurate system; thereby increasing effectiveness in downstream business planning.